More than 300 GPs have ended their partnership with Richard Branson's Virgin Care to provide healthcare services after criticism that the arrangements might see doctors personally profit from sending patients to clinics they part-own under the coalition's health reforms.

Virgin, under its former name Assura, had set up two dozen local "provider companies" – known as GPCos – which sought to make money by being paid by the NHS to offer community services such as dermatology, physiotherapy and rheumatology to patients. All were run as partnerships with local GPs.

But the government's decision to force GPs to commission health services had put family doctors in a "position of possible conflict of interest", the company admitted on Wednesday.

The result is that Virgin has taken over the provider companies, releasing the doctors from their obligations. A company spokesman said talks with GPs have been going on for 18 months.

"Even though we have robust policies and procedures in place which are endorsed by the Department of Health, many of our GPs have become increasingly worried about the perception of potential conflicts of interest. Moving away from our partnership model removes this concern."

Dr Ian MacDonald, former chair of the Assura Coventry GPCo, said: "We fully accept that the world has changed since we began working with Virgin Care, particularly in light of recent developments such as the Health and Social Care Act, and as GPs we want to ensure that there is a clear division between provision and commissioning".

This article was amended on 25 October to make clear that the decision was confirmed on Wednesday but the process of dissolving the GPCos has been on-going for 18 months.